Monday, 13 October 2008

Newspaper : 13th October

Brown offers Europe a lesson in leadership. Wolfgang Münchau, The FT (en)

Analysis: Gordon Brown 'The Raised Magician'. Andrew Porter, The Telegraph (en)
" ... Number 10 refute the suggestion that he is "enjoying" the financial meltdown a bit too much, but they cannot disguise how their man does seem more at home dealing with the turmoil than at any other time in the last year ..."

Banks to be nationalised in £37bn state intervention. Andrew Porter, James Kirkup and Gordon Rayner, The Telegraph (en)
" ... Lloyds TSB will also be given a taxpayer-funded handout in return for shares, while Barclays will announce plans to raise about £7 billion privately to avoid seeking Government assistance.
If the plan succeeds, Barclays would be the only major British-owned High Street bank to be fully independent. The only big bank that does not need cash is the foreign-owned HSBC ..."

Leaders of eurozone adopt 'radical' British rescue plan. John Lichfield, The Independent (en)
" ... There will be no single EU-funded rescue package – something rejected as impractical – but there will be what the German Chancellor, Angela Merkel, described as a "toolbox" of measures which can be adopted at national level without shifting the financial pain from one EU country to another ...
... The collapse of inter-bank lending – which threatens to freeze all credit to business or individuals and to collapse the "real" economy – is regarded as the most chilling possible consequence of the financial crisis ...
... Relations between Chancellor Merkel and President Sarkozy are said to have been deeply strained by the crisis, despite a show of friendliness at yesterday's meeting and at another encounter in France on Saturday. Relations between Mr Brown and President Sarkozy appeared excellent, however ..."

We could be on the brink of a Great Depression. Andreas Whittam Smith, The Independent (en)
" ... let the words of the director general of the International Monetary Fund, Dominique Strauss-Kahn, ring in our ears. Mr Strauss-Kahn, having spent all Saturday with finance ministers in Washington, warned that the global financial system has been pushed "to the brink of a systemic meltdown". And he added that the measures taken thus far to deal with the financial crisis "have not yet achieved the goal of stabilising markets and bolstering confidence" ...
... President Roosevelt's chairman of the Federal Reserve, Marriner Eccles, tried to sum up its essence in his memoirs published in 1951. He had led the Federal Reserve from 1934 to 1948 and seen everything. I quote him extensively because of his sudden relevance: "This is what happened to us in the Twenties," Mr Eccles wrote, "We sustained high levels of employment in that period with the aid of an exceptional expansion of debt outside of the banking system (which) increased about 50 per cent. This debt, at high interest rates, largely took the form of mortgage debt on housing, office, and hotel structures, consumer instalment debt, brokers' loans, and foreign debt." ..."

Déjà vu: six steps that make up a great panic. William Rees-Mogg, The Times (en)
" ... If China and India have been particularly impressive in the crisis, the other emerging Asian markets have performed reasonably well. They experienced the Asian crisis of a decade ago and learnt some painful lessons about the importance of liquidity. You do not need to tell Asian bankers that cash is king.
In the early stage of the present panic, Europe was complacent, taking the view that this was an American crisis, caused by holdings of American sub-prime mortgage securities in American banks. However, if the United States has been a big loser in the crisis, so has Europe. European banks turned out to have too much toxic debt and toxic derivatives. This was bad banking, badly regulated, whether it occurred in the US, the UK or the eurozone ...
... The IMF and the World Bank, the Federal Reserve, the European Central Bank, the European Union, the British regulatory authorities will all have to review their position. So will the world's largest banks. The group of eight will have to be extended to China and India. The world has changed; the world's banking system must change with it ..."

Reliance on the US will never be the same . Anatole Kaletsky, The Times (en)
" ... two things are fairly clear about this surprisingly strong and cohesive package. First, while short-term stock market reactions are unpredictable, there can be reasonable confidence about the package’s economic impact — it will avert a catastrophic economic collapse or long-term depression. Secondly, the ability of European governments to launch their own financial rescue without waiting for US leadership represents a fundamental shift in global economic relations ...
... Which brings me back to the reasons for cautious optimism about the economic impact of last night’s European measures. Like the British version, this package addresses the two fundamental causes of the present financial crisis: the panic among bank depositors created by Mr Paulson’s disastrous decision to put Lehman Brothers into bankruptcy; and the panic among bank shareholders created by his equally misguided decision to expropriate the shareholders in Fannie Mae ...

Germany set for €470bn rescue . Bertrand Benoit, The FT (en)
" ... The German government was on Monday preparing to endorse a bill to restore liquidity and inject fresh capital in the country’s ailing banking and insurance sector potentially worth up to €470bn – the biggest state intervention in the economy since the end of the War ..."

Iceland to sue over ‘bullying’ reaction. Sarah O’Connor, The FT (en)
" ... Asked if the Icelandic government would sue, he said: “That is an open question. The UK authorities have said they will sue us ... well both countries can sue if they see fit. Going to court is one way of settling disputes in a civilised way.” He also said he would support Kaupthing’s plans to sue the British government. Kaupthing is in talks with London-based lawyers.

" ... Russia, which had enjoyed huge wealth reserves as oil prices soared to records, now is scrambling to spend those dwindling funds wisely. Unlike the strategy in the United States, where funds for a $700 billion bailout of the financial industry are being gathered by borrowing that will increase the national deficit, Russia is drawing funds from its oil-enriched national savings account to support its stock market ... But that cash is running out quickly ..."

" ... For now, the damage has been largely limited to the Russian elite ... the country has not yet developed a broad investor class, and most people have not squirreled away their savings in the market.
As a result, though the stock market here had soared to $1.5 trillion in value, making it one of the world’s biggest, it had a very narrow base of investors. It was dominated by foreign and Russian investment funds, which sprinted for the exit when things started turning bad.
The Kremlin has also sought to contain the fallout from the crisis by having the major Russian television networks, which it controls, play down or even ignore the stock market collapse here. The network news programs have instead focused on financial troubles in the United States and Europe ..."

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